From Texas, I mostly cover the energy industry and the tycoons who control it. I joined Forbes in 1999 and moved from New York to Houston in 2004. The subjects of my Forbes cover stories have included T. Boone Pickens, Harold Hamm, Aubrey McClendon, Michael Dell, Ross Perot, Exxon, Chevron, Saudi Aramco and more. Follow me on twitter @chrishelman.

Why It's The End Of The Line For Wind Power

It’s the end of the world as we know it. That’s what the U.S. wind power industry is saying to itself these days. And they aren’t talking about some Mayan doomsday nonsense.

On Jan. 1 the federal production tax credit on wind investments expires. For the past 20 years the credit has offset about 30% of the cost of building wind turbines. Add to that the “renewable portfolio standards” for green energy mandated by 29 states, and as a result we’ve seen wind farms spring up across the country. Since 2007 nearly 40% of all the new electricity capacity built in this country has been wind. Wind now generates roughly 3.5% of U.S. electricity.

Don’t expect wind’s share to climb beyond that level any time soon. The end of the tax credit could very well mean the end of the wind industry.

According to the federal Energy Information Administration, the “levelized cost” of new wind power (including capital and operating costs) is 8.2 cents per kWh. Advanced clean-coal plants cost about 11 cents per kWh, the same as nuclear. But advanced natural gas-burning plants come in at just 6.3 cents per kWh.

But it could be getting a lot worse for wind. A fascinating new report by George Taylor and Tom Tanton at the American Tradition Institute called “The Hidden Costs of Wind Electricity” asserts that the cost of wind power is significantly understated by the EIA’s numbers. In fact, says Taylor, generating electricity from wind costs triple what it does from natural gas.

That’s because the numbers from the EIA and wind boosters fail to take into account a host of infrastructure and transmission costs.

First off — the windiest places are more often far away from where electricity is needed most, so the costs of building transmission lines is high. So far many wind projects have been able to patch into existing grid interconnections. But, says Taylor, those opportunities are shrinking, and material expansion of wind would require big power line investments.

Second, the wind doesn’t blow all the time, so power utilities have found that in order to balance out the variable load from wind they have to invest in keeping fossil-fuel-burning plants on standby. When those plants are not running at full capacity they are not as efficient. Most calculations of the cost of wind power do not take into account the costs per kWh of keeping fossil plants on standby or running at reduced loads. But they should, because it is a real cost of adding clean, green, wind power to the grid.

Taylor has crunched the numbers and determined that these elements mean the true cost of wind power is more like double the advertised numbers.

He explains that he started with 8.2 cents per kWh, reflecting total installation costs of $2,000 per kw of capacity. Then backed out an assumed 30-year lifespan for the turbines (optimistic), which increases the cost to 9.3 cents per kwh. Then after backing out the effect of subsidies allowing accelerted depreciation for wind investments you get 10.1 cents. Next, add the costs of keeping gas-fired plants available, but running at reduced capacity, to balance the variable performance of wind — 1.7 cents. Extra fuel for those plants adds another 0.6 cents. Finally, tack on 2.7 cents for new transmission line investments needed to get new wind power to market. The whole shebang adds up to 15 cents per kwh.

Ouch.

As Taylor figures it, natural gas would need to cost upwards of $20 per mmBTU before gas-fired power would cost as much as wind.

Granted, the American Tradition Institute is a right-wing nonprofit that in the past has railed against climate scientists and sought to discredit Global Warming fear mongering. That doesn’t mean Taylor’s calculations are wrong, just that everyone on the pro-wind side ought to read the report and chime in with their critiques.

The American Wind Energy Association says that the wind sector employs 37,000 and boasts 500 factories building components. Even with new anti-dumping tariffs on Chinese makers of wind turbines, the AWEA says that if Congress fails to extend the production tax credit for wind, many of those jobs could be eliminated and factories closed in early 2013. That’s how important these tax credits are to wind’s viability.

Taylor and Tanton figure that at the current price of natural gas, and before counting any subsidies or transmission costs, ratepayers are paying about $8.5 billion more this year for electricity from wind than they would have paid if it were gas-fired power. That amount doesn’t even include the cost of the direct federal subsidies.

What’s more, ratepayers will have to shoulder that cost for as long as the turbines are in operation. That’s $8.5 billion a year that ratepayers are forking over to subsidize a less efficient, more expensive technology; $8.5 billion that could otherwise be invested in natural gas electricity, or better yet, nuclear.

Just think, in South Carolina, power company Scana and its partners are investing about $11 billion to construct two 1,100 mw nuclear reactors on roughly 1,000 acres. To get the same amount of electricity out of wind (remember that turbines operate at an average of less than 50% capacity because of wind’s intermittancy) and you’d need more than 1,700 turbines stretched across 200,000 acres, for an upfront investment of $8.8 billion. The nukes might cost more upfront, but they last longer, they provide reliable base load power and they emit zero carbon.

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If you are a big investor (or you know one), you should be interested in a renewable source of energy that I invented. Electric power plants based on this source of energy will cost $1200/kW, (the source itself $250/kW). I am going to sell electric energy to these users, who need constant power for 24 hours, at the price $0.04/kWh. This means return of investment within 3.5 years, and then pure profits $350/(kW*year). H. Tomasz Grzybowski, tel. +48-517-206-960, e-mail: htg@interia.pl

Right on Nuclear unless you don’t build them for the estimated cost. No nuclear has come in on budget that I know of, but all the old ones that went over cost saved a lot of money in the long run (over their lives) unless some dope did not maintain or repair them properly. Now there is a benefit in having diverse sources of electricity, but the PTC needs to be phased out.

Everyone should pay pay close attention because these snakes are looking for a phase out compromise for their undeserved tax credits. Any phase out of wind industry tax credits is a con job. This industry has been lying to the public for decades while slaughtering off protected bird populations. They deserve absolutely nothing except a bad name from their years of deception.

Chritopher Helman has a wrong view on the real cost of controlling fossil power plants. When done right. Electricity from wind turbines has the lowest cost, end has therefore always preference over fossil electricity.

It is true that fossil power plants are a backup and fill the gaps when there is not enough wind. However this adapting to the variability of wind power, is a service that can be bought on the market for about 0,1 cents per kW. Which is very cheap, and does not require many fossil power plant to be online all the time. But the electricity markets in the US do not work, obviously.

Wind power reduces fuel cost, and prevents the wear and tear of wel operated power plants, when the operators care about that aspect and cost. But US the operatos Cristopher is referring to, do not use this cost reducing knowledge.

The argument about power lines is true, but the same is true about the transport lines for gas and coal. Someone has to pay for those pipes, railways, ports and ships.

And don’t forget the billions that Hurricane Sandy brought in the areas that were hit.

These are the hidden cost of fossil power plants, that Christopher forgets. Blinded by “Houston, Texas. Energy capital of the world.”

Germany with 20% wind power has saved about 1% on fuel costs. The rule of thumb is for every 1 MW of wind on line you need .9 MW of hot standby. That means building 1.9 power plants where 1 would do. Germany has the highest cost electricity in Europe.

MIT conducted a Symposium on Managing Large Scale Integration of Intermittent Renewables, where some 75 experts attended. Large Scale Integration was determined to be between 20% and 30%. MIT Professor John Deutch warned policymakers and regulators that intermittent sources will cost more for total operations, and they have to decide who is going to pay for it.

“as renewable capacity has increased, the intermittent nature of wind and solar generation … has led to operational difficulties and unintended consequences for emissions and economic efficiency.” Here are a couple of excerpts from the findings.

“…when thermal generation plants are operated at partial load, fuel efficiencies will decrease, emissions will increase, and total system costs will be raised, thus diminishing the benefits of renewable generation.” Unfortunately, it looks like the more intermittent renewable we add to the grid the less effective they are. We need to look for something that works more effectively.

We need to change the focus from blind faith in wind and solar to utility scale energy storage.

Wind and solar will always be a part of the long range energy future of America. Better technology, better transmission lines, and particularly the availability of new back-up hydropower resources to handle the obvious intermittency problems will be key factors affecting how and when these important components of America’s overall energy portfolio can be brought onstream in a competitive and cost-effective way.

The USFWS has been helping the wind industry hide their bird and bat slaughter for decades. If anyone does believe any of this then consider how the USFWS is dealing with the rapidly declining whooping crane population.

After decades of increasing a rate of about 4% per year, the Aransas-Wood Buffalo population has been declining. This population decline correlates with the explosion of wind turbines put along their 2500 mile migration route in recent years. Last year only 192 were actually counted. In an effort to conceal this decline, last year the USFWS changed their survey methodology so their true numbers could be concealed.

Former Whooping Crane Coordinator, Tom Stehn is not happy with the new USFWS methodology for counting the cranes. His disgust over this can be seen in this recent statement. “The new USFWS survey methods employ fixed transects flown at 1,000 meter intervals over four hours, whereas the census transects I used averaged ~400 meters wide and flights lasted approximately six hours. It is incomprehensible how the new survey method that finds fewer cranes is considered better than an actual census.” http://whoopingcrane.com/stehn-frustrated-with-new-whooper-count-method/.

For 29 years Tom Stehn watched over this flock on their wintering grounds in Texas. Part of his job was to count the cranes every year from the air. As Tom Stehn points out, the whooping cranes cannot accurately be counted at 1000 meters or.62 miles search intervals from the air. This accuracy problem becomes even worse with increasing search altitudes and when looking for these birds against lighter backgrounds.

He is absolutely correct on this because according to Coast Guard Search and Rescue protocol, if you want to find something from the air, there is a proper way to conduct searches. http://www.uscg.mil/directives/cim/16000-16999/CIM_16798_5b.pdf. Tom Stehn’s search widths of 400 meters fit Coast Guard Search and Rescue protocol and were correct if you actually wanted to see all the whooping cranes on their wintering grounds. So according to Coast Guard Search and Rescue protocol, the new USFWS count methods using 1000 meter intervals are all wrong and can not possibly see all the cranes. This is all by design as I will explain below.

From the USFWS web site “Counting the Birds” the newly adopted count methodology is justified with this explanation……….. “First, most study areas are too large to ensure that no individual animal enters or exits the area during a survey. Second, various circumstances, including the unpredictable behavior of wildlife, the density of vegetation and observer fatigue, typically results in some birds within the survey area being missed.” http://www.fws.gov/refuge/Aransas/wwd/science/counting_birds.html.

Here is why this statement is not true. First of all the study or survey areas around the Aransas Wildlife refuge are obviously not too large because Tom Stehn counted the whooping cranes for 29 for years with his flight patterns. He also did this when there were more cranes in the population. Secondly their new sampling methods are designed to not see all the cranes. By actually not seeing all the cranes this allows a mathematical formula (like those used to count elk or deer over thousands of square miles) to be used. From this formula their numbers can be estimated and easily embellished. As for “Observer Fatigue”, what they really should be talking about is observer cover up or observer bias because Mission Fatigue Standards for the coast guard call for 6 hour flight times and 12 hour mission times per 24 hour period. The new USFWS 4 hour survey times are well under any observer fatigue standards and Tom Stehn’s 6 hour flight times were fine as well.

Today the free flying whooping Crane population is in a very serious state of decline and over 200 of them have vanished in recent years. The primary point of all this is to illustrate the USFWS is not to be trusted and that they are clearly not working in the best interests of the Whooping Cranes. I happen to care about wildlife so none of this sets well with me. I also know that with the new count methodology, the USFWS knows exactly what they are doing. In fact they are not even breaking any laws because they know it is not a crime to be stupid, which is what they would claim if pressed on any of this.

Bottom line……….No one should expect the USFWS whooping crane 2012 /2013 count to be accurate and nothing from this agency concerning the wind industry can be trusted.

I happen to know that a secret California Condor deal was cut (they call it mitigation) between the wind industry, the USFWS , the CA DFG, and several conservation groups about 20 years ago.

Today with this mitigated nonsense we have 3 isolated small populations of condors with wind projects closing in on all sides. These condors are not wild, they are not self-sustaining or free. The condors have had most of their habitat stolen from them and the ones now flying around are just hanging around their feeding stations. If they start wandering around wind projects they are trapped because researchers know they will be killed by turbines. If they are killed you will never hear about it.

The last known sighting of a wild condor in Arizona was in 1924 near the town of Williams. Today the Perrin wind farm is catching the winds in this historical California Condor habitat. The Vermilion Cliffs National Monument where the Arizona condors population or prisoner camp has been set up is about 80 miles away. A short flight for a truly wild condor. Soon the free flying population of whooping cranes will be gone and we will have a population living a similar lifestyle as the condors. The migrating free spirited ones will be dead and those remaining will be another localized population of prisoners. This may be a good answer for Wall Street and Lawyers but it is one sick way to manage the world.

But there is an even bigger problem with the wind industry slaughter. Hundreds of species that get little attention are being impacted across the world by the wind turbines, not just condors and whooping cranes.

This is why I comment and give advice to people all over the world about the wind industry. These madmen have to be stopped.

Unfortunately, the real answer to this dispute is not so simple. There are pros and cons to both natural gas and wind power: job gains and losses to each, environmental gains and losses to each, etc. They do work well together, however, in moderation. See my op-ed piece in the Denver Business Journal at http://bit.ly/YkXXmn (note: behind a paywall until mid January). However, it is well past time for the PTC to be phased out and for wind to stand on its own.